Spreadsheet Models for Managers

Getting Access to Spreadsheet Models for Managers

If you use Excel to model businesses, business processes, or
business transactions, this course will change your life. You’ll learn how to create tools for yourself that will amaze
even you. Unrestricted use of this material is available in two ways.

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Spreadsheet Models for Managers

Present value of a non-uniform payment stream can be computed period-by-period.

Example:

Interest over a 4 year period is 4% (compounded annually)

Payments are 2,500; 2,500; 3,200; 4,200, at the beginning of each period

What is the present value of this income stream?

In this example, we look at a case that wouldn’t be possible using pv in a straightforward manner, because the
payments are non-uniform. But by decomposing it in any of several ways, we can still use the function.

Nesting invocations of worksheet functions can be a bit tricky, because
nested function calls are difficult to think about. Sometimes, in developing a spreadsheet
model, we can gain clarity by avoiding nesting. That is, while we’re still thinking about how to
approach a modeling problem, we intentionally choose to avoid nesting function calls. After we
understand the problem better — and only then — we might go back and replace what we’ve done
with a more compact version that exploits nesting. In addition to producing forms that are
easier to think about, this practice of developing a simpler form first has another benefit. It
enables us to examine intermediate values more easily, which enables us to confirm that the
calculations we’re performing make sense.

Some feel that building something that you intend to replace is a waste of effort — that it’s
far easier to build things in final form from the start. When that approach works, it is faster
and more efficient. But when we think we’re likely to make mistakes, the “slower” way is faster.

In years past, we’ve learned that what makes a model dynamic — as opposed to static — can be
difficult to grasp. If you have some doubts yourself, and you haven’t yet looked at the reading on
Models vs. Tools, we believe that you
will find it helpful.